Correlation Between Ford and HusCompagniet

Can any of the company-specific risk be diversified away by investing in both Ford and HusCompagniet at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and HusCompagniet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and HusCompagniet AS, you can compare the effects of market volatilities on Ford and HusCompagniet and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of HusCompagniet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and HusCompagniet.

Diversification Opportunities for Ford and HusCompagniet

-0.05

Correlation Coefficient

Ford  HusCompagniet

Good diversification

The 3 months correlation between Ford and HusCompagniet is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HusCompagniet AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HusCompagniet AS and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with HusCompagniet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HusCompagniet AS has no effect on the direction of Ford i.e., Ford and HusCompagniet go up and down completely randomly.

Pair Corralation between Ford and HusCompagniet

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.27 times more return on investment than HusCompagniet. However, Ford is 1.27 times more volatile than HusCompagniet AS. It trades about 0.02 of its potential returns per unit of risk. HusCompagniet AS is currently generating about -0.14 per unit of risk. If you would invest  957.00  in Ford Motor on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Ford Motor or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Ford Motor  vs.  HusCompagniet AS

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

HusCompagniet AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days HusCompagniet AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ford and HusCompagniet

The main advantage of trading using opposite Ford and HusCompagniet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, HusCompagniet can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HusCompagniet will offset losses from the drop in HusCompagniet's long position.

The idea behind Ford Motor and HusCompagniet AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.